Interview with the PPA’s John Pappas- Part I

June 10, 2011 - 5:31 PM EDT
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John Pappas is executive director of the Poker Players Alliance, a non-profit organization that attempts to represent American poker players’ interests. The PPA has faced widespread criticism recently as the United States Congress has failed to provide legislation to license and regulate online poker and the US Department of Justice has largely put a stop to online poker playing in the US.

In this first half of the interview, Pappas discusses his role at the PPA, the PPA’s litigation efforts, the current legislative landscape, the PPA’s efforts to help return players’ funds, and the legal status of online poker in the US. In the second half of this interview, Pappas discusses what players can do to help, the successes and failures of the PPA, other organizations involved in lobbying Congress about internet poker, and more.

 

PPA Basics

Noah Stephens-Davidowitz: Can you please describe your role at the PPA?

John Pappas: Sure. I am the executive director of the organization, and I manage kind of the day-to-day operations of the Poker Players Alliance, and that ranges from everything from our lobbying effort in Washington and at the state levels to our litigation efforts to our PR and grassroots, as well as kind of membership coordination and communication. I am the top-level manager for all of those areas of the organization, but I have employees who help and consultants who help in all of those respects.

NSD: So you mentioned both legislative and litigation efforts. To what extent does the PPA do both? What are you focused on? Or are you focused on both of those things?

JP: Yeah. [We are focused on both.]

From a litigation perspective, we’ve always focused on proving skill vs. chance at the state level. We’ve been involved in numerous cases in Colorado, Pennsylvania, South Carolina–We’re currently involved in a case in Virginia. And those essentially come about when our members approach us, say, “Hey, I was organizing a home game, or I was trying to organize a charitable poker tournament, or I was organizing a bar league poker, and the cops came and shut us down.” And they say, you know, “What can we do?”

And we hear about these pretty regularly, but we have to be selective. We have to find the right cases in the right states and the right set of circumstances as well. You know, we don’t want to get involved in cases where maybe the players were taking a rake and making a business out of it. Clearly, that would violate a number of laws. So, we try to identify cases that make sense, cases where we can prevail, and then we pursue those cases.

One case that we’re currently involved in that is outside that scope is with respect to the Illinois players who were sued by a third-party attorney. Illinois online poker players were sued by a third-party attorney who is trying to essentially extort money from them using a little-used, archaic, third-party forfeiture law–a recovery loss law for illegal gambling.1 So, we’re involved in supporting that case as of right now as well. So those are the sort of things the PPA is involved in from a litigation side.

NSD: What is the PPA’s budget?

JP: For litigation, specifically?

NSD: No. In general.

JP: You know, it certainly depends. We spend approximately–Or we have historically spent approximately about $1.5 million a year on lobbying and then, you know, with everything else–PR and litigation, employee salaries, etc–at least another million. So it’s safe to say somewhere between 2 and 3 million annually.

NSD: How much of that is administrative costs, like employee salaries?

JP: A very small percentage of our costs go to employee costs.

NSD: And how much of that money comes from players?

JP: Very little, unfortunately. The majority of our money comes from the Interactive Gaming Council.

NSD: So, as you just said, the majority of your funding comes from the IGC, which as you know has principle members PokerStars and Full Tilt. Howard Lederer and Chris Ferguson were also members of your board until recently. So, to what extent has the PPA represented the sites’ interests?

JP: Well, I mean our bottom line interest is with the players. And you know, up until recently, I think it’s arguable that the sites’ and the players’ interests [were] very much in line, and particularly from a legislative perspective. The sites wanted a US licensed and regulated market, and the players wanted a US licensed and regulated market, and that’s exactly what the PPA advocated for. In some cases, we advocated for bills that the sites might not necessarily like–bills that would have kept them out of the market for an extended period of time, bills that have language in them that said if you committed a crime or attempted an unlawful wager, you couldn’t get a license. And certainly, while the sites would argue, and we might be in agreement, they might not have engaged in accepting illegal internet bets, there were certainly those in government who thought that, and that’s clearly evidenced by the actions of April 15.

So, our ultimate goal continues to be unchanged. It’s that we want a US licensed environment so that American players can play on sites that are based here in the US, so the players can have ease of deposits and withdrawals, so that they can be ensured that they are playing on sites that are fair and honest, so that, if they do have a problem, if there is a legal issue, that they do have recourse to the courts, and that there’s also all the other social safeguards put in place–that there isn’t minors accessing sites, that there isn’t exploitation of problem gamblers, those type of things. You know, exactly what we’ve been advocating for all along, and what we’ll continue to advocate for.

Potential Federal Legislation

NSD: And how is that going? What does the current federal landscape look like?

JP: Well, there is at least one bill already in existence, and that is HR 1174. This is sponsored by John Campbell from California, and the lead Democratic sponsor is Barney Frank from Massachusetts. That bill is referred to the House Financial Services Committee. It has not yet received a hearing. I believe it has somewhere north of 20 co-sponsors.2 And, the prospects of that bill are vague at best. The sponsors of the bill remain very optimistic that they can push the bill. I remain less optimistic, given that the chairman of the committee which that bill is referred is Senator Bachus and Senator Bachus has been a very outspoken critic of internet gaming, and I just don’t see him, in good faith, moving a bill that would be a benefit to the players or a bill that would expand the rights of individuals to play online poker or other games.

So the future of that bill kind of remains unclear, but we’re very hopeful about new legislation that could be introduced very soon by Joe Barton who is the Republican from Texas, a poker enthusiast himself; and has a very [inaudible adverb] crafted bill that would simply license and regulate internet poker. He’s working on that legislation now, and we’re hopeful that he can introduce it soon. And that bill would be referred, most likely, to the House Energy and Commerce Committee. The Energy and Commerce Committee is a more favorable committee in terms of its makeup. The chairman of the committee isn’t, you know, automatically opposed to the idea, and I think we have a very fair chance of getting some legislation through that committee.3 And, in fact, we spent a good deal of time lobbying those members over the last several months. And that culminated with our fly-in, which we held at the end of last month, and our state directors from all around the states came and met with members of the House Energy and Commerce Committee, and they all got a very good reception from a number of offices, from a number of staffers, as well as the members who said, “Hey, when this bill is introduced, we’ll take a serious look at it,” and they hope it’s something they can support.4

NSD: To be fair, that’s very different than saying, “We support this bill.”

JP: Yeah. Oh yeah. I mean, I’ve worked in politics now for fourteen years, and I certainly know that looking at a bill and seeing if we can support it is different than not. Although, we’ve had feedback from Barton’s office just this week that said, “Hey, we’ve had a number of offices call us since your fly-in looking for information about the bill.”

NSD: Do you have a head count, or is that too early?

JP: It’s too early for a head count or a whip count at this time. You know, really what you need is a bill introduced, something that people can actually look at.

NSD: And when will that happen?

JP: Well, again, we’re hopeful that it will happen very soon. We know that they’re in the drafting process, and obviously the sooner is better, but we want to make sure that it’s a good bill and not just something introduced in angst.

To be clear, even if there are problems with the bill once it’s introduced, there’s always opportunities to fix it down the road. A bill introduced is just that; it’s just an introduced bill; what really matters is the end product.

NSD: So you said ”We are working to make sure that the bill’s good.” How much influence does the PPA have in writing this bill?

JP: Well, I mean, to be clear, members of Congress and their staff write the bill. We can provide input; we can provide suggestions, but ultimately, it’s a member of Congress who decides what gets included and what doesn’t get include. So, you know, we have what you would call the “proverbial seat of the table.” And, you know, they are sharing info with us, and we are sharing info with them. But, you know, ultimately it’s gonna be the staff and the member of Congress’ decision on what ends up in the bill.

NSD: And who else has a seat of the table?

JP: Well, yeah. I know there are a number of other stakeholders here in Washington who have an interest. I don’t know who else has a seat of the table, to be honest. I just know from the input that we’ve provided. We’re not all sitting at the table together. So, you don’t know who else is influencing a member from another perspective all the time. So that remains to be seen, and I guess that may become more clear once the bill is introduced, and if there are things in there that we find objectionable, then maybe we’ll be able to identify who else also has a seat of the table. But, I feel pretty good that the Barton bill is going to be something that the PPA and the poker community can support.

NSD: And what’s the best-case-scenario timeline for the bill coming out and hopefully passing?

JP: The best-case timeline would be introduction perhaps even as soon as next week. Congress is in recess this week. So, let’s say introduction within the next two weeks and then I would say the next best opportunity would be a hearing sometime in July. And then when they return from the August recess, in September, perhaps a mark-up and a vote and then the issue can be presented to the full house at that point.

You know, one thing that we’ve always believed is that the internet poker/internet gaming legislation isn’t going to go through the normal process. It’s not gonna be like the Schoolhouse Rock “How a Bill Becomes a Law.” But, we do believe that there has to be some momentum built on the House side for support, particularly given that you have a Republican-controlled House, and historically Republicans have not been proponents of this type of legislation. So, if we can show some momentum on the House side, through the committee, through this Barton bill, or even the Campbell-Frank bill, then I think other key members of Congress can coalesce around the idea and [a bill could] be included in some other must-pass legislation before the end of the year.

That’s, you know, the ideal scenario. Now, a lot of things have to line up for that to happen. and it’s not easy. But, it certainly is something that we’re shooting for. And if we can get it done, fantastic. And if we can’t, we’ll be at the fight again next year.

NSD: I’m guessing you don’t want to give a percent chance that this happens, but I’ll ask anyway.

JP: No, I don’t. It’s just too amorphous to even handicap it. So, you know, I think people would be safe keeping money in their pockets now, and I wouldn’t be placing bets in any direction. I think we need to first get a bill introduced and first get a hearing and perhaps get a mark-up in committee, and from there I think we’ll better handicap the chance of this getting done down the road.

NSD: So say this does get passed this year. How long would it take from passage of the bill to me actually being able to play, in my home, licensed and regulated online poker in the United States?

JP: You know, it’s funny. I was at a conference in San Francisco a couple weeks ago. It was a global internet gaming show and expo, and a lot of folks from the brick and mortar community as well as the European gaming operators were there; internet gaming operators were there. And the same question was asked to them, and the majority of people on the panel said that people would be able to play by 2012.

I was encouraged by that. I think 2012, to have a licensed and regulated market is very realistic. If we can get a bill done this year, I think the idea of any legislation that gets passed now would be one of expediency rather than this kind of slowrolling it like they were with the Reid draft, where there was a reason to slowroll it because they wanted to squeeze out the overseas competition and they wanted to keep them out of the US market for a period of time so that, when US companies entered it, they would not be so behind the eight-ball.5 Now, with April 15 and the large US-facing internet poker companies no longer in the market, I think now the call is going to be for expediency rather than, “let’s slow it down.” Unfortunately, I think the blackout period has happened without legislation.

NSD: And, if the bill does pass, what opt-out provisions would it have for states?6

JP: Well, that’s an open question. Again, a bill upon introduction versus what gets finally passed–That will be the heart of the negotiation. Right now, our preference is to have legislation that says that states that wanted to opt out would have to opt out by either demonstrating that they have laws that make it illegal in their state already or that the legislature would have to pass a bill. So, that would be our preference. Again, that will be a very tricky issue, and it’s something that, you know, we will see change throughout the process.

Player Funds

NSD: What has the PPA been doing to facilitate the return of US player funds from Absolute Poker and Full Tilt?

JP: Well, our hands are somewhat tied in our ability to, you know, reach into the bank accounts of Full Tilt and Absolute and just simply pay the players.

NSD: Let me ask a different question, then. Does the PPA consider this to be–Well, not a responsibility, but a goal of the organization?

JP: Absolutely. We believe it’s a responsibility of the sites to pay the players, and we want to hold the sites accountable for that. That is where I view PPA’s responsibility.

What actions the PPA can take to get the players their money back from the sites is still unclear. We’ve been consulting a number of attorneys to figure out what we could do, whether it’s direct negotiations with the DOJ–although, based on our previous interactions with the DOJ, we think that’s not going to be likely. You know, we’ve been in a situation like this before; players’ money has been seized before, and the PPA went to the DOJ and wanted to intervene, and the DOJ said, “No. Sorry. You can’t.”

NSD: Could you be more clear? Why can’t the PPA intervene?

JP: Well, it’s not our money; it’s not the PPA’s money that’s there, and the fact that the PPA is not party to the forfeiture.

NSD: Are players party to the forfeiture?

JP: Players are. A coalition of players who wanted to be named in a suit to pursue this, and there are attorneys out there who would take that case–and probably take it on a contingency basis.

NSD: Couldn’t the PPA organize such a thing?

JP: We could. It’s something we’re considering. We–You know, we haven’t. Like I said, we had difficulty trying to pull this off in previous instances, so we’re just trying to figure out the best way to do it. And it’s also going to be something we’ll have to figure out from a–You know, if we can get it done at a relatively low cost, as well.

NSD: To be fair, you guys are spending millions of dollars per year on lobbying. So what do you mean by a relatively low cost?

JP: Well, we have been paying millions of dollars a year on lobbying, but a lot of things have changed since April 15, and whether we’re going to be able to continue to spend that kind of money in DC remain to be seen. I can assure you that it won’t be that kind of money.

NSD: So you’ve lost your funding?

JP: We certainly don’t have the type of funding we used to have.

NSD: So is the IGC no longer supporting the PPA at all?

JP: The IGC is going to continue to support the PPA, but the funds of the IGC have been impacted by all this.

NSD: So Poker Stars and Full tilt are no longer funding the IGC, or are they funding it less?

JP: I think it’s fair to say they’re funding it less. And I don’t believe Full Tilt is in a position to–And I think Full Tilt is 100% focused on trying to pay back the players, and they’re not focused on the PPA and its efforts.

NSD: What about, instead of legal options or negotiating with the DOJ, representing the players to the public? Appearing on TV, on the radio, etc?

JP: Yeah, I mean, I think we do that already. I mean, there’ve been numerous stories with the PPA talking about one of the priorities is player funds, and everything from USA Today to the Associated Press have covered stories like that. If there’s more that we should do, then we’re happy to do it.

We just recently appointed Rich Muny as Vice President of Player Relations with the PPA, and part of his job is going to be communicating more with the poker trade and the blogs and on the forums, and these are the type of things that we’ll be talking about. But, I think there are some other things we’re looking at as well, perhaps even legislatively, to assure players get their money back.

NSD: How could legislation help there?

JP: Well, right now, the DOJ is in possession of the seized assets. Now, the DOJ has said they’re not going to release those seized assets, and typically, seized assets are reserved for them to pay for things related to the prosecution. They don’t generally release those assets prior to the prosecution being complete.

Through legislation, we could require that the DOJ use those seized assets to pay players, set up a third party trust to which players could file their complaint and then they would have to get the money back from the DOJ.

NSD: Do you have specific plans to do this? Do you have congressmen who would support such a bill?

JP: We’re thinking about what the legislation would look like; we’re trying to find other precedent for this. I think there are some members of Congress who would be interested. Really, what we need to do is identify players who have a lot of money held up and really use them as the ones to go to the members of Congress to say, “I live in your district. I need you to present legislation that’s gonna help me get my money back.”

NSD: And, to be clear, you’re talking about very specific legislation, legislation that would only apply to this.

JP: Correct. Correct.

Now that’s a question. Can that be done? Can we retroactively do that? Again, these are things our attorneys are looking into now as we speak. Would that be viewed as a post facto? Can you tell the DOJ that they need to release funds even though the funds were seized with the expectation under law that they could do what they wanted with the funds? So those are some of the things that our attorneys are looking at. I guess the hope would be that all this can be resolved and that Full Tilt and Absolute can pay back the players–and doing so in short order, although every day that goes by, it seems as if the PPA needs to take a more aggressive stance, and we’re certainly looking at those options.

NSD: Does the PPA feel that it was its responsibility at all to ensure that player funds were safe before Black Friday?

JP: No. [Pappas pauses.] No.

The Legal Status of Online Poker in the US

NSD: A principal argument of the PPA with opponents, particularly legislative opponents, has been that the government really can’t shut down online poker, so it might as well license and regulate it to make it safe and make it taxed. I’ve always personally felt that that was quite a strong argument. However, on April 15th and then again on May 23rd, I think the government did a good job of poking holes in that argument. Do you still feel that that argument is valid?

JP: Well, to be clear, there are still sites out there that are accepting US play, and I would imagine, even if those sites are having trouble now, they’re gonna find payment methods down the road with which to service the US population. So, I think that it’s fair to say this is not going to go away.7

But, I also agree your premise: that, you know what? For some, they might feel they’re vindicating. The UIGEA has been vindicated as an effective enforcement rule. I think that’s only going to be a short-term feeling, though. I truly believe that there will continue to be places where people can play online poker.

The problem is we don’t know where those companies are going to be based out of. We don’t know by what means they’re going to be transferring payments and accepting deposits. I think it put consumers in a really bad position to be forced to spend their money or put their money onto sites in which they have no guarantees. So I think, really from a consumer protection argument, we’re actually stronger now than we were maybe even two months ago because I think now, if people are going to want to put their money online, they’re probably more at risk for potential fraud and abuse than they ever were before, and I think our government has a responsibility to make sure that consumers are protected.

NSD: The PPA has maintained that it is legal for online sites to allow players from the US. It is clear that the US government disagrees, especially based on its actions from May 23rd, which were entirely based on the UIGEA. Does the PPA still hold this position?

JP: Our position has been that there’s been no federal law that specifically prohibits the acceptance of online poker wagers, and we still maintain that position. It’s always been our position. And it is our position that it’s certainly not unlawful for the players.

NSD: That statement seemed a bit carefully worded. Do you think it’s illegal or legal for online poker sites to service US customers. For example, do you think that Cake is currently breaking US federal law?

JP: [Pappas pauses.] No.

NSD: So, I found a quote on your website that represents this statement. “The Unlawful Internet Gambling Enforcement Act of 2006, does not change any federal gambling laws.”8 But, I have heard quite convincing legal opinions that UIGEA clearly extends state gambling laws to federal law when the internet is involved. For example, a state like Maryland, as you know, has pretty clear laws against gambling. So, the UIGEA would say that gambling online in Maryland counts as unlawful gambling and therefore a site like Cake should not be spreading games in Maryland.9 What’s the PPA’s argument against this?

JP: Well, there are certain states where they do make it clear that they should not be operating or accepting wagers. And, in those states, I think the sites are on much less strong legal standing. So, I think those sites need to be careful in the states in which they operate. If they have clear prohibitions against operating an internet poker site or internet gaming, then they should avoid those, or they should be prepared to defend them should they get shut down. I would imagine the sites that are continuing to operate are aware of this and they’re either going to either cease their operations for fear they’re going to be shut down or they’re going to fight it if they are.

NSD: To be clear, you just said that you think that Cake is not violating any law.

JP: A federal law. I said they’re not violating any federal law.

NSD: Well, yes, but I was expressing the argument that the UIGEA extends state laws to become federal law.

JP: I mean, that’s a pretty big leap. What the UIGEA says is that it does not change any state, federal, or local gambling law. It’s simply an enforcement mechanism: That which was illegal would be illegal, and that which was legal would continue to be legal.10

NSD: Do you feel that the PPA could have done a better job clarifying the legal situation to players before April 15?

JP: I think we make it pretty clear on our website that there are certain states that consider it illegal and that you should check with your state laws.

NSD: The PPA couldn’t list those laws themselves?

JP: We didn’t list those laws themselves. And, again, a lot of those laws are not necessarily–There are those who would say there are 6 states, and there are those that will say it’s 10 states, and those that will say 9 states. So we weren’t in a very good position to analyze and tell players these are exactly the state laws in all of the states.

NSD: So what can players do to help the legislative efforts?

JP: . . .

In part II of this interview, Pappas discusses what players can do to help, the successes and failures of the PPA, other organizations involved in lobbying Congress about internet poker, and more. We’ll post on twitter and facebook when part II goes up.

Edited on 6/10/2011 5:46 PM EST: Fixed various spelling errors.
Edited on 6/10/2011 7:22 PM EST: Fixed misspelling of Senator Bachus.

Footnotes

  1. Pappas is referring to the case Crespo vs. Seth, Jaka, et al. The complaint attempts to use Illinois law 720 ILCS 5/28-8 to allow a third party to sue Illinois internet poker players.
  2. The bill in question has 26 co-sponsors, five Republicans and 21 Democrats.
  3. The House Energy and Commerce Committee is chaired by Representative Fred Upton, a Republican from Michigan.
  4. The PPA staged a fly-in to Washington D.C. on May 24th.
  5. Pappas is referring to the draft of an internet poker bill proposed by Harry Reid last December. Leaked versions of the bill included a fifteen-month “blackout period” during which no future licensee would be allowed to service the US market.
  6. It is widely accepted that any federal gambling bill in the United States would have to allow states the ability to restrict gambling within their territory. Some proposals require states to formally opt in if they would like to participate, while others require them to formally opt out if they would NOT like to participate. Some allow the governor to do this, while some require the legislature to act to opt in or out. A governor is much more likely to take an action than a legislature in general, so proponents of online gambling typically prefer bills that include states unless their legislature explicitly opts out.
  7. According to PokerScout.com, the only networks that currently accept US players with a seven-day average cash game traffic of more than one hundred players are Merge, Bodog, Cake, Everleaf, and Yatahay. Merge has temporarily stopped accepting new US sign-ups, and all of the sites on the Yatahay network have had their domain names seized by the DOJ.
  8. This quote is from the PPA’s FAQ. It is part of the response to the question “Is playing poker legal in the United States?”
  9. I am referring to the definition of “unlawful internet gambling” in the UIGEA: “IN GENERAL.—The term ‘unlawful Internet gambling’ means to place, receive, or otherwise knowingly transmit a bet or wager by any means which involves the use, at least in part, of the Internet where such bet or wager is unlawful under any applicable Federal or State law in the State or Tribal lands in which the bet or wager is initiated, received, or otherwise made.” See this article for a discussion of Maryland state law. Subject: Poker plans to provide much more analysis on this topic in the future.
  10. Pappas appears to be referring to the rule of construction of the UIGEA, which states “NO provision of this subchapter shall be construed as altering, limiting, or extending any Federal or State law or Tribal-State compact prohibiting, permitting, or regulating gambling within the United States.”

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5 Responses to Interview with the PPA’s John Pappas- Part I

  1. gobnob
    June 10, 2011 at 5:34 PM EDT

    littered with errors

    • Noah Stephens-Davidowitz
      June 10, 2011 at 5:48 PM EDT

      Hi gobnob,
      We try very hard to provide error-free articles, but we’re certainly not perfect. We’d appreciate it if you’d point out any specific errors so that we can correct them for our readership.

      -Noah

  2. sajeffe
    June 10, 2011 at 7:17 PM EDT

    Great article. Very informative. Looking forward to part deuce. :-)

  3. Rob C
    June 11, 2011 at 2:09 AM EDT

    Excellent long form interview. You really asked some tough questions and JP gave honest answers. The PPA is in a tough spot, trying to be transparent while representing an industry of people who conceal information and bluff for a living.

  4. KMS
    June 15, 2011 at 2:58 AM EDT

    Great part 1–and you guys are really asking the tough questions, which I admire. Keep up the good work.

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